Monthly Archives: July 2011

Robert Pollin, UMass Amherst economics professor and co-director of the Political Economy Research Institute, is cited in “Sustainability Jobs Get Green Light at Large Firms” an article which appeared in the Wall Street Journal earlier this week. Pollin found that every $1 million spent on green-related projects creates about 17 jobs for the life of the project. The article notes that while unemployment remains high, companies seem to be hiring for positions relating to sustainability or renewable energy. In fact, large corporations like Coca-Cola Co. and United Parcel Service Inc. have both recently hired chief sustainability officers, charged with making sure their companies save energy and are environmentally responsible. (Wall Street Journal, 7/11/11)

In her Economix blog, Nancy Folbre, UMass Amherst economics professor, examines why deficit reduction and not unemployment is dominating the public policy agenda. She offers several possible explanations including the fact that high unemployment rate is not adversely affecting overall business profits. (New York Times, 7/11/11)

The A.F.L.-C.I.O. and other unions keep demanding “Good jobs now!” Progressive think tanks like the Economic Policy Institute carefully monitor employment trends. Many economists, including the professionally prominent members of the Employment Policy Research Network, insist on the need for more attention to the issue. As Till von Wachter of Columbia University put it, “Unemployment is the No. 1 economic problem facing the country today.”

Some business leaders have spoken up. Last summer, Andrew Grove, the former chief executive of Intel, wrote a passionate commentaryfor Bloomberg BusinessWeek calling for a “job-centric” economy.

But this is not something the country can achieve with jobs-oblivious politicians. Why isn’t unemployment reduction front and center on the policy agenda? More specifically, why has the debate over deficit reduction shoved it aside?

First, unemployment is concentrated among the less educated, blacks and Hispanics who lack political or economic clout.

Second, high unemployment is not hurting overall business profits, which have soared to historic heights. In the 1930s, joblessness reduced the demand for consumer goods, idling many businesses as well as workers, creating economic incentives to support public job-creation efforts.

Today, our largest corporations and richest investors are well positioned to take advantage of growing demand in emerging markets far from our shores, whether in the form of increased exports or new investment opportunities.

As a small-business owner explained in a recent Wall Street Journal article, he only sells domestically and does not have the opportunity to “exploit foreign markets that are growing faster.”

The goal of this study is to examine whether women in the highest levels of management ranks of firms help reduce barriers to advancement in the workplace faced by women. Using a panel of over 20,000 private-sector firms across all industries and states during 1990-2003 from the U.S. Equal Employment Opportunity Commission, we explore the influence of women in top management on subsequent female representation in lower-level managerial positions in U.S. firms. Our key findings show that an increase in the share of female top managers is associated with subsequent increases in the share of women in mid-level management positions within firms, and this result is robust to controlling for firm size, workforce composition, federal contractor status, firm fixed effects, year fixed effects and industry-specific trends. The influence of women in top management positions is stronger among federal contractors, in firms with larger female labor forces, and for white women. We also find that the positive influence of women in top leadership positions on managerial gender diversity diminishes over time, suggesting that women at the top play a positive but transitory role in women’s career advancement.

Using the NBER Shared Capitalism Database comprised of over 40,000 employee surveys from 14 firms, we investigate worker attitudes towards employee ownership, profit sharing, and variable pay. Specifically, our study uses detailed survey questions on preferences over profit sharing, forms of employee ownership like company stock and stock option ownership, as well as preferences over variable pay in general, to explore how preferences for these different types of output-contingent pay vary with worker risk aversion, residual control, and views of co-workers and management. Our key results show that, on average, workers want at least a part of their compensation to be performance-related, with stronger preferences for output-contingent pay schemes among workers who have lower levels of risk aversion, greater residual control over the work process, and greater trust of co-workers and management

Using data from a large cross-section of British establishments, we ask how different firm characteristics are associated with the predicted benefits to organizational performance from using team production. To compute the predicted benefits from using team production, we estimate structural models for financial performance, labor productivity, and product quality, treating the firm’s choices of whether or not to use teams and whether or not to grant teams autonomy as endogenous. One of the main results is that many firm characteristics are associated with larger predicted benefits from teams to labor productivity and product quality but smaller predicted benefits to financial performance. For example, this is true for union recognition as measured by the number of recognized unions in an establishment. Similarly, when a particular firm characteristic is associated with lower benefits from teams to labor productivity or product quality, the same characteristic is frequently associated with higher predicted benefits to financial performance. This is true for the degree of financial participation and employee ownership and also for establishment size and a number of industries. These results highlight the advantages of analyzing broader measures of organizational performance that are more inclusive of the wide spectrum of benefits and costs associated with teams than the labor productivity measures frequently studied in the teams literature.

Rapidly rising deficits at both the federal and state and local government levels, along with longterm financing problems in the Social Security and Medicare programs, have triggered a onesided austerity-focused class war in the US. Similar class conflicts have broken out around the globe. A coalition of the richest and most economically powerful segments of society and conservative politicians who represent their interests has demanded that deficits be eliminated by public-sector austerity – severe cuts at all levels of government in spending that either supports the poor and the middle class or funds crucial public investment. These demands constitute a deliberate attempt to destroy the New Deal project, begun in the 1930s, whose goal was to subject capitalism to democratic control. The right-wing coalition seeks to replace that project with a modernized version of the ‘free-market’ capitalism of the 1920s. In this paper I argue that our deficit crisis is the result of a shift from the New-Deal-based economic model of the early post-war period to today’s neoliberal, free-market model, a shift initiated under Ronald Reagan and continued under the presidents who succeeded him. The new model has generated slow growth, rising inequality and rising deficits. Rising deficits in turn created demands for austerity. After tracing the long-term evolution of our current deficit crisis, I show that this crisis can be resolved by raising taxes on upper-income households and large corporations, cutting war spending, and adopting a Canadian or European style health care system. There is no need to accept austerity. Calls for austerity should be seen as what they are – an attack by the rich and powerful against the basic interests of the American people.

In an article for Dollars & Sense, Gerald Friedman, UMass Amherst economics professor, argues that universal health care is the only viable solution to soaring health care costs. According to Friedman, the cost of health insurance has been rising more than twice the general rate of inflation for decades and the share of household income spent on health care has more than doubled since 1970 from 7% to 17%. “If current trends continued,” Friedman warns, “the entire economy would be absorbed by health care by the 2050s.”

While many believe that universal coverage is is fiscally impossible, Friedman conservatively estimates that moving to a single-payer system in Massachusetts would actually save approximately 16%, even after providing coverage to everyone in the state who is currently without insurance. He believes that the percentage of savings would be higher nationally. “This could be done largely by reducing the cost of administering the private insurance system, with most of the savings coming within providers’ offices by reducing the costs of billing and processing insurance claims.” (Dollars & Sense, July 2011)

In their paper How Wall Street Speculation is Driving Up Gasoline Prices Today Robert Pollin, UMass Amherst economics professor and co-director of the Political Economy Research Institute (PERI) and James Heintz, associate director and associate research professor of PERI, show that a major factor contributing to the recent run up in gasoline prices at the pump is large-scale speculative trading in crude oil in the commodities futures market. They estimate that, for the month of May, the rise in speculative trading on oil has led to an 83-cent-per-gallon premium on gas prices at the pump. Pollin and Heintz emphasize that the federal government, and specifically the Commodities Futures Trading Commission, has the authority to control excessive speculation on oil through provisions in the Dodd-Frank Financial Reform Act, and must now exercise that authority. Their paper is the focus of a New York Times Dealbook article on high gas prices.